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Z Energy cuts annual earnings guidance on rising crude oil prices, supply disruptions

Tuesday 23rd January 2018

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Z Energy cut its annual guidance by about $20 million following a weaker-than-expected performance in the December quarter, due to a shutdown of the New Zealand Refining fuel pipeline to Auckland and the rising price of crude oil.

The company said replacement cost operating earnings before interest, tax, depreciation, amortisation and fair value adjustments (ebitdaf) will be between $430 million and $455 million in the year to March 31, down from a previous range of $445 million-to-$475 million. 

In the three months to Dec. 31, Z sold 1.1 billion litres of fuel, up 5 percent from the same quarter a year earlier. Combined petrol sales from Z and Caltex fell 4.7 percent to 307 million litres, while combined retail and commercial diesel sales rose 3.7 percent to 334 million litres. Other fuels gained 12 percent to 311 million litres. 

Brent crude oil prices have recently hit US$69 per barrel, from US$58 per barrel at the end of September and US$53 per barrel at the beginning of the financial year. Z said price increases will have a noteworthy impact in the current financial year due to the consistent, extended rise in crude prices and its increased size since acquiring Caltex. The oil price is estimated to account for between $14 million and $18 million of the 2018 earnings impact. 

Supply disruptions from the NZ Refining pipeline outage in September 2017 was estimated to have a $5 million impact over the year's results, but Z maintained guidance at that time. However, another temporary shutdown to the pipeline due to a false alarm in December, and rising demand for commercial diesel over the summer which meant Z ran out of stock, caused an estimated $7 million impact on 2018 earnings, it said. 

Separately, retailers Z, BP and Mobil are set to compensate car owners who last year bought petrol with elevated sulphur levels, which can damage fuel gauges. 

The company's shares fell 2.6 percent to $7.50, and have gained 0.8 percent in the past 12 months.


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